Louisiana Tax Institute reviews 2024 special-session tax overhaul, flags cleanup items

In February 2025 the Louisiana Tax Institute reviewed tax changes enacted during the 2024 third special session, hearing Department of Revenue officials describe immediate statutory changes and a list of technical corrections lawmakers will likely need to file in the upcoming regular session.

Secretary of Revenue Richard Nelson opened the presentation by saying he had spent “all of last year going around the state trying to sell tax reform,” and acknowledged ongoing outreach to explain the enacted package.

The department told the institute that most statutory changes are already in effect and have begun changing take-home pay and tax filing mechanics. Assistant Secretary Luke Morris summarized the major changes on the individual side, saying “most of this legislation, if not all of it, is already in effect.” He described a new flat individual income tax rate of 3 percent and a set of changes that increase the standard deduction and raise retirement-income exemptions; the department plans to index some amounts to inflation and to modify tax forms and K‑1s to reflect state-specific depreciation and pass-through reporting.

Why it matters: The package reorders how Louisiana taxes income, consumption and business activity and includes a constitutional amendment that will appear on the March 29 ballot (as presented at the meeting). The institute discussed both near-term compliance issues for taxpayers and longer-term policy choices the state will face as revenues and caps shift between state and local governments.

Key provisions and clarifications

- Individual income tax: The enacted package sets a flat 3% individual rate and increases several deductions. The constitutional language doubles the senior standard deduction described in the meeting from $12,500 to $25,000 for taxpayers 65 and older, and the department said the retirement-income exemption was increased from $6,000 to $12,000 and will be adjusted for CPI. The department said these changes should make more retirement income tax-free for many older filers.

- Bonus depreciation and amortization: The state “decoupled” from a federal phase-down and locked in 100% bonus depreciation at the state level. The department said this will require creating Louisiana‑specific K‑1s and will allow taxpayers who opt in to state treatment to fully expense qualifying capital investments.

- Corporate tax and franchise: The corporate income tax was changed to a flat 5.5% rate with a $20,000 standard deduction for corporations, and the corporate franchise tax is scheduled for repeal effective January 1, 2026 (as stated in the presentation).

- Sales tax changes: Act 10 expanded the state sales-tax base to specifically include digital products; Act 11 raised the state sales tax from 4.45% to 5% with a future scheduled reduction noted in the presentation to 4.75 (date cited in the presentation as “02/1930”). The department said it has published lists of retained and repealed exemptions and is updating administrative guidance.

- Inventory tax and local options: The package creates an opt-out path for local governments from the state inventory tax. The constitutional language the department described would allow a parish that opts out to receive a one-time incentive equal to three years of collections up to $15 million (or a five‑year phased option), and the department said the statutory schedule of payments will require technical fixes in places where municipal inventory taxes were omitted. The presentation also noted a carryforward conflict in the enacted law (one bill references a five‑year carryforward and another references ten years); the department said it had sought a ten‑year carryforward and that the final effective law appears to use five years, which may require corrective legislation.

- Severance tax and auditing: The presentation said most substantive severance tax rates were left unchanged in the special session but that language now requires audited well costs for horizontal-well exemptions (replacing the former self‑reporting practice). The constitutional amendment described would also remove a prior local cap on severance-tax distributions (the presentation cited an approximate cap of $1.2 million as the prior limit), potentially increasing local parish receipts if voters approve the amendment.

Compliance and technical issues highlighted

Department staff identified several “cleanup” items they expect the legislature to address: clarifying definitions for information services versus cable and satellite, restoring intended education and nonprofit exemptions (the department said it issued a bulletin saying it will not enforce unintended tax collection on public-school admissions until the Legislature fixes the text), correcting the Jazz Fest exemption language, clarifying a vehicle‑rental‑during‑warranty provision for auto dealers, and ensuring pass‑through entities are eligible for inventory tax credit carryforwards as intended.

Filing systems and taxpayer assistance

Local officials and department staff said county/local filing forms were updated as of January 1 to add lines to separate pharmaceutical and MME sales collections, but the department’s statewide taxpayer portals were running behind schedule. One local official said he did not expect the Department’s online state-filing site to be fully available before March 1; the Department said alternate filing methods (paper, LATA) remain available and that penalties or interest related to delayed state e‑filing would be handled case‑by‑case while fixes are implemented.

Industry and parish concerns

Contractors and trucking representatives raised questions about the tax treatment of freight and transportation when the seller is also the shipper — for example, bulk materials or gravel where transportation previously was not taxed. The department said sourcing and a fixed‑price contract relief form exists to preserve the transaction’s original treatment in many mid‑contract cases. Parish officials and a public commenter from Lafourche Parish pressed the institute about local millage levels, the distributional effect of higher sales taxes on low‑income households and options for local control over homestead exemptions; the department and institute members said those topics will be part of future discussions.

Next steps and institute direction

Department staff indicated they will prepare draft corrective bills and additional guidance and the institute’s chair said he hopes to convene one more meeting before the regular legislative session to consider technical fixes and potential endorsements. The meeting concluded with the chair noting plans for follow-up and then adjourning the institute.

Quotes used in this article are taken verbatim from the meeting transcript and are attributed to the speakers who made them.